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What are the standard clauses for a Partnership Agreement?

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Introduction
Standard Clauses for a Partnership Agreement 2.1. Partnership Name and Business 2.2. Partnership Purpose 2.3. Partnership Duration 2.4. Capital Contributions 2.5. Profit and Loss Sharing 2.6. Management and Decision-Making 2.7. Drawings and Salaries 2.8. Dissolution and Winding Up 2.9. Dispute Resolution 2.10. Confidentiality 2.11. Governing Law and Jurisdiction 2.12. Entire Agreement 2.13. Notices 2.14. Amendment 2.15. Severability
Conclusion

Introduction

A Partnership Agreement is a legally binding contract that outlines the terms and conditions governing the relationship between partners in a business. It is essential for establishing clear expectations, responsibilities, and rights among the partners, minimizing potential disputes and ensuring the smooth operation of the partnership. This document will outline the standard clauses typically included in a Partnership Agreement in Kenya.

Standard Clauses for a Partnership Agreement

2.1. Partnership Name and Business

Name: The agreement should clearly state the name of the partnership. This name should be unique and not already in use by another business.
Business: The agreement should specify the nature of the business the partnership will engage in. This should be a detailed description of the partnership's activities, products, or services.

Source: The Partnership Act, Cap 52, Laws of Kenya, Section 4 states that "Every firm shall have a firm name, and every partner shall be liable for all debts and obligations of the firm incurred while he is a partner."

2.2. Partnership Purpose

Objectives: The agreement should outline the specific goals and objectives of the partnership. This could include profit maximization, market expansion, or providing a particular service.
Scope: The agreement should define the scope of the partnership's activities, including any limitations or restrictions on the business.

Source: The Partnership Act, Cap 52, Laws of Kenya, Section 5 states that "Every partner is bound to render true accounts and full information of all things affecting the partnership to the other partners."

2.3. Partnership Duration

Term: The agreement should specify the duration of the partnership, whether it is for a fixed term or an indefinite period.
Renewal: If the partnership is for a fixed term, the agreement should outline the process for renewal or termination.

Source: The Partnership Act, Cap 52, Laws of Kenya, Section 23 states that "A partnership may be dissolved by the happening of any event which, according to the agreement between the partners, determines the partnership."

2.4. Capital Contributions

Amount: The agreement should specify the amount of capital each partner will contribute to the partnership.
Form: The agreement should clarify the form of capital contributions, such as cash, property, or services.
Valuation: If contributions are in the form of property or services, the agreement should establish a fair valuation method.

Source: The Partnership Act, Cap 52, Laws of Kenya, Section 17 states that "Every partner is entitled to share in the capital and profits of the firm in the proportion agreed upon between the partners."

2.5. Profit and Loss Sharing

Ratio: The agreement should specify the ratio in which profits and losses will be shared among the partners.
Method: The agreement should outline the method for calculating profits and losses, such as net income or gross revenue.

Source: The Partnership Act, Cap 52, Laws of Kenya, Section 18 states that "The partners are entitled to share the profits and losses of the firm in the proportion agreed upon between them."

2.6. Management and Decision-Making

Roles: The agreement should define the roles and responsibilities of each partner in managing the partnership.
Decision-Making: The agreement should establish the process for making decisions, including the required majority vote or consensus.
Authority: The agreement should specify the authority of each partner to bind the partnership in transactions.

Source: The Partnership Act, Cap 52, Laws of Kenya, Section 19 states that "Every partner is bound to act in good faith towards the other partners."

2.7. Drawings and Salaries

Drawings: The agreement should outline the process for partners to withdraw funds from the partnership for personal use.
Salaries: The agreement should specify whether partners will receive salaries, and if so, the amount and payment schedule.

Source: The Partnership Act, Cap 52, Laws of Kenya, Section 20 states that "Every partner is entitled to receive interest on his capital at the rate agreed upon between the partners."

2.8. Dissolution and Winding Up

Events: The agreement should specify the events that will trigger the dissolution of the partnership, such as the death or bankruptcy of a partner.
Process: The agreement should outline the process for winding up the partnership, including the distribution of assets and liabilities.

2.9. Dispute Resolution

Mechanism: The agreement should establish a mechanism for resolving disputes between partners, such as mediation, arbitration, or litigation.
Procedure: The agreement should outline the procedure for initiating and resolving disputes.

Source: The Arbitration Act, Cap 4, Laws of Kenya, Section 3 states that "Any person may agree with any other person to refer any existing or future difference between them to arbitration."

2.10. Confidentiality

Information: The agreement should specify the types of confidential information that partners are obligated to protect.
Obligations: The agreement should outline the obligations of partners to maintain confidentiality, including restrictions on disclosure.

Source: The Official Secrets Act, Cap 56, Laws of Kenya, Section 3 states that "Any person who, being in possession of any official secret, communicates it to any person other than a person authorized to receive it, shall be guilty of an offense."

2.11. Governing Law and Jurisdiction

Law: The agreement should specify the governing law that will apply to the partnership.
Jurisdiction: The agreement should specify the jurisdiction where any disputes will be resolved.

Source: The Civil Procedure Act, Cap 21, Laws of Kenya, Section 13 states that "Every suit shall be instituted in the court within whose jurisdiction the defendant resides or carries on business."

2.12. Entire Agreement

Representations: The agreement should state that it constitutes the entire agreement between the partners and supersedes any prior agreements or understandings.

Source: The Contracts Act, Cap 23, Laws of Kenya, Section 4 states that "All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object."

2.13. Notices

Method: The agreement should specify the method for delivering notices to partners, such as email, registered mail, or courier.
Address: The agreement should include the addresses for delivering notices to each partner.

Source: The Civil Procedure Act, Cap 21, Laws of Kenya, Section 10 states that "Every summons, warrant, or other process of the court shall be served in the manner prescribed by these rules."

2.14. Amendment

Process: The agreement should outline the process for amending the partnership agreement, including the required majority vote or consensus.

Source: The Contracts Act, Cap 23, Laws of Kenya, Section 6 states that "An agreement may be made in writing, or orally, or partly in writing and partly orally."

2.15. Severability

Invalidity: The agreement should state that if any provision of the agreement is held to be invalid or unenforceable, the remaining provisions will remain in full force and effect.

Source: The Contracts Act, Cap 23, Laws of Kenya, Section 7 states that "An agreement, the meaning of which is not certain, or capable of being made certain, is void."

Conclusion

A well-drafted Partnership Agreement is crucial for the success of any partnership. It provides a framework for the partners' relationship, outlining their rights, responsibilities, and obligations. By including the standard clauses discussed above, partners can ensure that their agreement is comprehensive, legally sound, and protects their interests. It is advisable to seek legal advice from a qualified lawyer to ensure that the Partnership Agreement is tailored to the specific needs and circumstances of the partnership.